The clock is ticking for opportunity zone investment. Are you prepared?
As 2019 comes to a close, investors will need to play their cards right regarding opportunity zones. The coming months will be vital to the development of the country’s opportunity zone program.
Here’s a breakdown of what’s happening with OZs and some tips to help investors stay on their A-Game.
Off to a Slow Beginning
When 2019 started, investors were taking their time. There was a lot of speculation within the industry as to how opportunity zones would play out in the big picture. The tangible benefits and ROI-boosting powers of opportunity zones weren’t so clear, causing investors to withdrawal until there was a better idea of what’s coming next.
For the most part, investors chose to err on the side of caution and wait it out. Playing it safe meant stalling on the big moves, and this resulted in a slowdown in opportunity zone activity. Fundraising projects were slow to grow and many thought that there just wasn’t enough interest around the country’s OZs.
Finally Heating Up in the 3rd and 4th Quarter
Things were at a stalemate – that is, until the second half of 2019 came about.
Why did this happen? What caused the sudden turnaround?
The tides started changing when the US Treasury Department released its second round of opportunity zone regulations in March. This release helped to put investors at ease and also clarify their position when dealing with OZ assets.
On the topic, the President of Javelin 19 Investments, Jill Homan, shared with Bisnow:
“I think this set of regulations covers a lot of ground, and will certainly spur investment in the operating business side and get a lot of real estate investors comfortable, because this incentive really fits neatly with how we traditionally operate.”
Steve Glickman, the Founder and CEO of Develop LLC, also shared some expert insights:
“I think now, the capital that has been waiting in the wings will finally begin to get out there and form funds or invest in funds that have already launched. The overarching thing that’s positive about the regulations is just the sense of clarity and finality about what we’re going to get from the Treasury Department.”
This news was exactly what investors were waiting for as it seems to already be taking effect. Since April, there’s been a significant increase in OZ investment activity. Funds are growing, money is moving, and investors are taking another look at the program as a whole.
Deadlines Are Approaching
Besides the good news, investors still can’t get too comfortable. Time is nearly running out to join in on the opportunity zone movement.
December 31, 2019 is the current deadline. Anyone who participates before this cut-off date will be given the 15% tax reduction for investing in the program – a huge benefit that any investor’s hungry for.
While some political figures are working to extend the deadline, nothing has changed as of yet. The limited time frame and heightened stakes are causing experts to believe that the OZ project will be even more successful than initially anticipated.
Things are happening fast in the world of opportunity zones. Are you ready? For more commercial real estate insights, check out our blog.